HPInsight: The global HPI's top March headlines from 1922 through 2012

(Editor's
note: The HPInsight article posted below is included
in this month's Hydrocarbon Processing print
edition. To read the top March 2012
headlines,click here.)

In this issue of HPInsight, workforce, fuel quality
and capacity overhang are a few of the challenges that the
hydrocarbon processing industry (HPI)
must address and resolve. Expansion of the refining and petrochemical industries is followed
by excess supplies chasing dwindling demand. This is not a new
condition; however, history and technology do modify how the HPI
re-emerges from the slump.

Headlines from Hydrocarbon Processing, March
2002:

What is the fuel combination to run future
engines? Is zero pollution an objective that can be
reached within five years, using available technologies? Yes,
say representatives of automakers and engine R&D centers
meeting at an international conference organized by the French
Petroleum Institute (IFP). IFP claims that technologies for
combustion by controlled auto-ignition in gasoline engines and
homogeneous charge compression ignition for diesel engines are
going to change considerably to protect the environment. IFP is developing a new
approach to diesel combustion engines; it uses
multiple-injection strategies. Concerns remain about fuel
quality for new engines.

Chemicals slump: This, too, shall pass, but
when? With the significant capacity overhang prevalent
today, petrochemical producers will need to closely monitor
comparative international oil and domestic natural gas prices,
according to a CMAI report. In 2001, weakening economies became
a focal point for the global economy, accompanied by a severe
downturn in petrochemical demand. Strong
recovery is anticipated for 2002.

More perspective on mergers and
acquisitions. In the HPI, it is difficult to escape
the boom and bust cycle. Corporate buying and
selling have been extremely active for HPI companies, according
to Accenture. Acquisitions can be very fruitful in bust cycles
if done well. The Conoco/Phillips merger is one example of a
promising and clear transaction.

Edinburgh becomes the worlds first city to
offer both sulfur-free unleaded gasoline and sulfur-free
diesel. These fuels became available in mid-February
2002 at 18 BP service stations. The new fuels are said to be
the cleanest gasoline and diesel products available in the UK.
(The fuel formulations are allowed to have a maximum sulfur
content of 10 ppm.) The new clean
fuels, arriving six years ahead of EU legislation
requirements, are produced at BPs Grangemouth refinery in eastern Scotland.

In a remote part of
Australia, Chevron and its
partners expanded the huge North West
Shelf
natural gas project. Hydrocarbon
Processing
2001.

The Saudis want to enter the US refining
market via a joint venture (JV) involving half of
Finas refining and marketing assets. The $1.3 billion
deal would involve two Texas refineries and 3,000 service
stations. This would be the first time that a
privatesector Saudi Arabian company (Arabian Petroleum)
has processed and marketed Arab crude outside the country. The
50-50 JV, Fina USA, aims to own refineries at Port Arthur
(150,000 bpd), and Big Spring (60,000 bpd), both in Texas. In a
similar plan, Saudi Aramco owns 50% of Star Enterprises, a
600,000-bpd refining network, and Texaco owns the other
half.

US refining capacity rationalization has
begun. Several refiners have announced
downsizing and/or proposed sales of assets.
Chevron, Shell, Amoco and Phillips are among those refiners
rationalizing. In addition, many smaller refineries have
announced temporary shutdowns due to poor margins. According to
a Salomon report, the US refining industry is the envy of the
world in terms of light product yields. But US refiners are
tiny by world standards. At present, 194 US
refineries are operating and have an average distillation capacity under 80,000
bpd. European and Asian refineries have
an average distillation capacity of 200,000 bpd. About 90 US
refineries have a processing capacity under 50,000 bpd. When
the rationalization round is complete, the US refining industry
will emerge a smaller and more profitable industry.

World LNG industry is growing. The world
liquefied natural gas (LNG) industry is on the move, according
to a new study by CEDIGAZ. In 1991, LNG trade reached 78.1
billion m3 (58 metric tons), an 8% increase over
1990 levels. The Asia Pacific region was particularly active,
with an 11% growth in import volume. Japan, South Korea and
Taiwan increased LNG imports from Malaysian and Australian
liquefaction facilities. Two new grassroots facilities are planned: The Bonny
Island, Nigeria, project will supply Europe and a new LNG
facility will be built in Qatar to export LNG to Japan. Eight
new LNG projects will be developed by 2010 with an estimated
capital cost of $30 billion.

US crude oil price to hit $20/bbl
soon. US crude oil prices will rise above $20/bbl, and
natural gas (NG) will increase to nearly $2/Mcf by year end.
The oil and NG prices now lag behind the economy. The global
oversupply of crude oil has depressed US oil and NG prices.
Seasonal demand for oil and NG was reduced due to mild winter
temperatures. Domestic drilling for oil and NG is the lowest in
the past 50 years due to price sensitivity.

Headlines from Hydrocarbon Processing, March
1982:

Natural gas pipeline to the Lower 48 from
Alaska is closer than ever to a becoming reality. The
Alaska natural-gas (NG) transportation system will have an
initial capacity of 2 Bcfd of NG, enough to displace 400,000
bpd of crude oil for 25 to 30 years. The 745-mile Alaska
segment of the project will be built and operated
by a consortium of 10 US and Canadian NG companies.

Oil price decontrol proves to be no
evil. Decontrol of crude oil prices
initiated a flurry of dire predictions. With the complete
phase-out of crude oil price controls in early 1981, oil
production in the Lower 48 states nullify predictions that
production would decline. Without price controls, the oil
industry increased drilling to an all-time high. An estimated
$50 billion was invested in E&P. Industry pessimists
predicted that decontrol would lead to skyrocketing oil prices.
In reality, the average price of a gallon of gasoline was
5¢ to 6¢ less than the peak price in 1981. With all
of the improvements under decontrolling oil prices, the US
still imports one third of its daily oil consumption. The
nation is still very vulnerable to sudden, major disruptions of
foreign oil supplies.

CEFIC investigates Western Europes chemical
industry. Western Europes chemical industry
continues to face economic and supply/demand imbalances. The
European Council of Chemical Manufacturers Federation's
(CEFICs) view is that Western Europe is in a deep
recession accompanied by structural inflation. During the
1960s, chemical production increased 15%/yr. This annual growth
stabilized in the 1970s to 5%7%. The rapid capacity expansion of the 1960s created
excess production capacity. Western Europe now faces completion from
Eastern countries. The Western European chemical industry must
develop a new strategy based on structural changes. The new
focus will be on raw material supply, processing efficiency and
developing a range of products for manufacturing and
distribution. The European chemical industry must find a
balanced system in which profitability and productivity are
depenalized.

Methanol research continues to make
an impact for transportation fuels. Two
methanol-powered automobiles with unique prevaporized fuel
system designs are undergoing a two-year test by Conoco.
Company employees will test drive the methanol cars1981 Ford
Fairmontsunder normal conditions. Gasoline is used to
start the engine and heat it to a set temperature before a
sensor switches the engine to methanol. Because the methanol is vaporized first, there
may be less cylinder wear.

Headlines from Hydrocarbon Processing, March
1972:

New regulations are proposed for no-lead
gasoline. The US Environmental Protection Agency
(EPA) has set a July 1974 deadline by which gasoline with 91
RON or less will be lead- and phosphorous-free. Lead in regular
and premium gasoline should not exceed 2 g/gal after January
1974, 1.7 g/gal after January 1975, 1.5 g/gal after January
1976, and 1.25 g/gal after January 1977.

Toray has new styrene extraction process. A
new process to extract styrene from cracked oil coproduced in
naphtha cracking has been developed by Toray Industries. The
process, STEX (styrene-extraction), is claimed to provide
several advantages, such as low material cost and a simple
process flow.

Pyrolysis process converts waste into
fuels. Occidental Petroleum has developed a new
pyrolysis process that can convert municipal solid waste into
low-sulfur fuels and other salable products. The new process
can recover 90% of the raw materials contained in municipal
trash. The process does not require hydrogenation, and it
operates at atmospheric pressure. Shredded waste is mixed with
pulverized coal at a 90:10 ratio. The pilot program is
sponsored by the US Environmental Protection
Agency.

This giant tower will stand
17 stories when
erected at Sun Oil Co.s lube oil plant
in
Puerto Rico. Badger Co., Inc., a subsidiary
of
Raytheon Co., provided the design and
engineering for the new plant. The 270-ton
tower was prefabricated in the US and
shipped to the Caribbean by barge.
Hydrocarbon Processing 1970.

Headlines from Hydrocarbon Processing and
Petroleum Refiner, March 1962:

Demand gains weak in 1961. In a preliminary
study by Du Pont, total gasoline demand increased by 1% in 1961
over 1960 levels. Total gasoline production only increased by
0.6%the smallest gain in 15 years.

Merges increase slightly for the HPI.
According to the (US) Federal Trade Commission, mergers and
acquisitions in the chemical industry were up slightly in 1961.
There were 66 mergers in 1961, 59 in 1960 and 62 in 1959. In
the petroleum and coal industries, there were 21 mergers. And
38.6% of the total mergers involved companies with assets
exceeding $50 million.

France dropping anti-dumping tariff.
Imposed in the fall of 1960, France has retracted its
anti-dumping tariff on polyethylene (PE). Other European
nations have threatened similar action, but did not follow
through. The tariff was enforced to hinder exporting cheaper
US-produced PE to the European market.

Steel industry may replace coal for blast
furnaces. Fuel oil may replace coke in the steel
business. Likewise, natural gas is under consideration to be
sent to blast furnaces with preheated air.

New copolymer developed. Union Carbide has
developed a unique ethylene copolymer. The new
copolymer is ethylene acrylate copolymer; it is similar to
vinyls, PE, rubber and neoprene. It features include
low-temperature flexibility (better than PE), good thermal
stability during processing, and high resilience at room
temperature.

New polypropylene polymers available. Amoco
has developed three viscosity grades of liquid polypropylene
(PP) polymers. The new products have low molecular weight.
Because the PP polymers are liquid, new product applications
are possible.

The Chinese Petroleum
Corp.s $9.5 million
ethylene plant in Kaohsiung, Taiwan, was
constructed by The Lummus Co. The new
facility will produce 120 million lb/yr of
high-
purity ethylene to support Taiwans
emergingpetrochemical industry.
Hydrocarbon
Processing 1968.

Headlines from Petroleum Refiner,March 1952:

Tennessee Gas begins operation of the largest gas
plant. The largest natural-gas processing facility was
recently completed. The facility is rated to handle 750,000
Mcfd. The separation of ethane and heavier hydrocarbons from
the gas stream is accomplished by refrigeration. The liquid
compounds will be used by the chemical industry.

Engineer shortage. The dangerous gap
between the supply of engineers and the need for their services
is becoming wider according to the US Office of Education and
the American Society for Engineering Education. Only 28,000
engineering students will graduate in 1952 to meet the present
demand of 60,000 to 90,000 engineers. Many of the 1952
graduates are either members of Reserve Officer Training Corps
units or are subject to the draft, having been granted
deferments to complete college courses. The defense industry is
likely to be short 40,000 to 70,000 engineers.

Competitive vs. cooperative research.
Applied research must remain competitive if it is to be
productive, according to Dr. Robert Wilson, chairman of the
board of Standard Oil Co. Petroleum refining has become essentially a
chemical-synthesis industry, and its magnitude of operations
dwarfs all other synthetic processes and products. Research has
also made petroleum an increasingly important source for many
vital products formerly manufactured from other raw materials.
Over 90% of the applied petroleum research conducted today by
competitive oil companies have brought benefits to the public.
This research faces the same threats that hamper all industrial
research. Among the threats are emasculation of the patent
system, compulsory licensing and government competition in
applied research.

Headlines from The Refiner and Natural
Gasoline Manufacturer, March 1942:

Standard Oil Co. has signed a contract with the US
government to construct a toluene plant at Whiting, Indiana. The facility will be
operational within a year and produce as much of this explosive
ingredient as produced for WWI. The company is also considering
possible construction of alkylation and
isomerization units for the same site.

Premier Oil Refining Co. will build a $3 million
plant at its Cotton Valley, Louisiana, site. The new
unit will provide 100-octane aviation gasoline and other
products.

The Canadian government announced plans to spend $40
million in connection with aviation gasoline and
butadiene. The plant will be operated by the dominion
government and will be located near a refining center.

Headlines from The Refiner and Natural Gasoline
Manufacturer, March 1932:

Fractionation will reduce gasoline costs from
high-sulfur petroleum. The cost of processing
high-sulfur crudes may be lowered by proper fractionation
methods according to a new study by the US Bureau of Mines,
Department of Commerce. Gasoline processed from high-sulfur
oils required chemical treatment after distillation to meet motor-fuel
specifications. The cost of this post-treatment is the main
difference in processing gasoline from various crude oils.
Better fraction methods can eliminate post-treating
gasoline.

Consumption lubrication oil on the rise. US
demand for lubricating oils in January 1932 increased sharply
in domestic and export businesses. Domestic consumption
increased to 1.5 million bbl over 1.4 million bbl in December
1931. Exports of lubrication oils rose from 597,000 bbl in
December 1931 to 616,000 bbl in January 1932.

Still runs down in January. The Bureau of
Mines figures for January show that crude runs to stills
were reduced by about 4 million bbl (MMbbl) to a total of 68.7
MMbbl. The reductions occurred for domestic crude; runs of
foreign crude remained at the same rate as December (1931).
Domestic crude oil consumption by refineries averaged 2.2 MMbpd
in January, down slightly from 2.24 MMbpd crude runs in
December. Foreign crude oil runs averaged 108,000 bpd.

Headlines from The Refiner and Natural Gasoline
Manufacturer, December 1922:

Excess California crude bids for
refineries. Present oil production in the state
exceeded plant capacity by more than 130,000 bpd. The average
daily refining capacity of California is
slightly over 300,000 bpd. The daily crude oil production rate
is 432,000 bpd. Not all of the produced oil is refinable;
however, there is a surplus of refinable crude oil in
California. A number of announced new refineryprojects are expected to be
completed.

Destructive distillation of oil shales. Oil
shale is the subject of an experiment. Distillation of shale
oil does yield a cut that will pass for motor fuel, but the
specific gravity of the cut is too low. Cracking this material
yields paraffins, naphthenes, unsaturates (acetylenes and
olefins) and aromatics.

When can gasoline be classified as good?
Gravity as the basis for quality specification of gasoline is
fast losing ground. Distillation testing is preferred. Not all
gasoline is good. Many refineries do produce quality gasoline
that is water free. But does gravity testing guarantee
good gasoline? New developments show that
distillation testing can provide consistent quality results.
Also, distillation methods reveal the
composition of the gasolinesomething that gravity cannot.
HP

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It is really very interesting to know HPI industry growth. I really appreciate HP management to publish major changes taken place in HPI since 1922 till date.

Thanks for sharing information in steady and persistent way.

somashekar.s k03.14.2012

I appreciate the efforts undertaken by HC management to publish the key events from Year 1922 to till date .

I would suggest that a Handbook be made for the same and presented to the readers on the major key events happened between the above golden period of HC age and keep it in the e-room for ready reference for the future readers.

Thanks,

Good Luck for the HC team members for spreading the knowledge relentelessly.